New work for Harris may offset any cuts

Technology

January 29, 2012|By Richard Burnett, Orlando Sentinel

Central Florida's largest locally based defense contractor, Harris Corp., has lined up some lucrative military work so far this year, which should provide added cushion against possible defense-budget cuts.

Riding the secure wavelength of its combat radios, Melboune-based Harris is still on a roll with a product line that has meant more than $1.5 billion in sales since 2009 alone. After proving its technical chops, Harris' Falcon radios have been fielded by the U.S. military throughout the wars in Iraq and Afghanistan.

Earlie this month, Harris landed Brazil as an international customer for the Falcon brand of advanced, multiband radios. The company received orders worth $10.7 million from Brazil's military. Harris also announced a $65 million deal with an unidentified allied country.

Adding to its latest spate of Falcon contracts, Harris last week received a $4.8 million deal from the U.S. Department of Defense for handheld and backpack versions of the system.

If there is any downside to Harris' bounty — at least for Central Florida — it is that there is little chance of the work leading to new jobs here. The company builds the radios at its division in Rochester, N.Y.

Harris' gain, Boeing's loss

There is an interesting back-story to Harris' booming combat-radio business. As told in a recent report by the Center for Public Integrity, a Washington research group, Harris became the prime beneficiary after another high-tech radio program, the Joint Tactical Radio System, collapsed from cost overruns and technical failures.

The Army poured $6 billion into JTRS equipment — built by Boeing Co. — but the units failed to perform when deployed in Iraq, according to David Axe, author of the report. That led to cutbacks in production, he reported, which ballooned the per-unit cost to $300,000 — double its original, 2002 estimate. By contrast, Harris' radios cost $57,000 each.

So as Harris adapted its equipment to meet the military's increasing demands, its combat-radio business took off, while Boeing's JTRS business was grounded.

Boosted by its thriving electronics and communications work, Harris' stock price fared well as the U.S> defense budget doubled during the war operations. But jitters about defense spending under President Obama took its toll on the share price, which plummeted in late 2008 after that election. It recovered in 2009 and rose steadily until falling again last summer when the president replaced retiring Defense Secretary Robert Gates.

Wall Street jitters

Although Gates had already launched an initiative to cut the defense budget, the industry didn't think his cuts would be as deep as those expected of his successor, former CIA director Leon Panetta. So defense stocks generally took a hit when Gates left.

Another factor played into Harris' stock decline last summer: the retirement of veteran Chief Executive Officer Howard Lance. Uncertainty about Lance's replacement contributed to Wall Street's jitters about Harris. His successor, former United Technologies Inc. executive William Brown, was chosen in October, and the company's stock price has slowly regained some traction since then.

Lockheed Martin Corp.'s stock price has been similarly affected, though to a lesser degree, by investor uncertainty about upcoming defense budgets. But after falling 17.5 percent last August, Lockheed's share price has risen 24 percent in less than six months.

Lockheed's Orlando-based Global Logistics & Training Division recently won a $94 million Air Force contract to support a major training center at Kirkland Air Force Base in New Mexico. Lockheed will provide computer software and other support services to the "hub for the Air Force's virtual combat training exercises."